US Treasury Yields Fall After Reversing Inflation-Led Selloff

3-line summary

• The Bureau of Labor Statistics reported September CPI rose 0.6% month-over-month (vs. 0.4% in August) and 3.7% year-over-year, above both the 3.6% economist forecast and August's 3.4% pace. The report briefly pushed Treasury yields sharply higher, with the 2-year yield hitting its highest level in more than two weeks, before yields across the curve reversed and closed the session lower.
• Per LSEG data, odds of an October 27-28 FOMC rate hike jumped from about 22% before the CPI release to roughly 40% in the morning, then eased back to about 33% by afternoon, as Fed officials signaled they may not rush to raise rates despite persistent inflation; expectations for a December hike strengthened.

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